Pace of Mortgage Lending Slows at Canada’s Big Banks

Signs of a cooling in Canada’s once-hot housing market are being felt at the country’s major banks.

Bloomberg

Royal Bank of Canada and Toronto-Dominion Bank Thursday both reported year-over-year volume growth in their Canadian residential mortgage business for the quarter ended Jan. 31, though the pace of growth was down compared with recent quarters and far less than the frothy double-digit growth rates they had seen in previous years. RBC and TD Bank–Canada’s two largest banks by assets–said volumes in the segment rose 5% and 7.4%, respectively.

In an interview with Canada Real Time, TD Bank’s chief financial officer, Colleen Johnston, said the rate of volume growth in the residential mortgage business is slowing down. She said demand and prices are showing signs of slowing due to the Canadian government’s move last summer to again tighten mortgage rules for homeowners.

“The government has really tried to tap on the brakes in the Canadian housing market and we think that’s smart,” Ms. Johnston said. “The mortgage rules have been tightened four times since 2008. And, we think those are good ways of making sure that we can see a soft landing in the Canadian housing market as opposed to a hard landing. It really appears to be a soft landing.”

Ms. Johnston said TD Bank’s real estate secured lending volume growth rose 5% year- over-year in the first quarter, and it expects to see growth of just under that this year.

About Canada Real Time

Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com